India will remain fastest-growing major economy in FY’24: Finance Ministry report

The Finance Ministry’s report said that core inflation was declining steadily while food inflation has eased. People shop on the eve of Dussehra (Dasara) festival, in Bengaluru, Karnataka. File
| Photo Credit: Murali Kumar K

India will remain the fastest-growing major economy in the world in 2023-24 fiscal on the back of strong domestic fundamentals and benign inflation expectations, a Finance Ministry report said on October 23.

The September edition of the Monthly Economic Review also flagged that global uncertainties have been compounded by recent developments in the Persian Gulf and depending on how the situation develops, crude oil prices may push higher.

Further, the relentless supply of U.S. Treasuries and continued restrictive monetary policy in the U.S. (with further monetary policy tightening not ruled out) could cause financial conditions to be restrictive.

At current levels, U.S. stock markets have greater downside risk than upside. If the downside risk materialises, it will have spill over effects on other markets, the report said.

“Fraught geopolitical conditions can cause a general increase in global risk aversion. If these risks worsen and are sustained, they can affect economic activity in other countries, including India,” the Ministry said.

However, the report emphasised that India’s macroeconomic outlook for fiscal 2023-24 is bright and is solidly underpinned by strong domestic fundamentals. Alongside private consumption, investment demand is also firming up.

There are additional growth levers in broad-based industrial growth and buoyant residential property markets. Industrial capacity utilisation has improved.

Further, the report said improved reservoir levels augur well for the upcoming Rabi season. Core inflation is declining steadily while food inflation has eased.

The Ministry noted that with a lower trade deficit and a comfortable forex reserves position, India’s external account looks robust. Echoing all this, Reserve Bank of India’s forward looking surveys on manufacturing, consumer confidence, employment and inflation expectations have optimistic findings.

“In sum, as IMF projections also confirm, India will remain the fastest-growing major economy in the world in FY24,” the report said.

While keeping the global growth projection for FY24 unchanged at 3%, IMF revised its growth projection for India upwards by 20 basis points to 6.3% in October.

This shows the growing confidence of global analysts as well in India’s economic strength amidst global uncertainties and fresh geopolitical challenges, the Ministry said.

While domestic macro fundamentals are strong and improving, downside risks arise from global headwinds and uncertainties in weather conditions, it added.